States offer tax breaks for hydroponic (soilless) farming

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Mission 2015: Biodiversity, a Massachusetts Institute of Technology (MIT) creation, was designed to present solutions to the biodiversity crisis and has identified hydroponic agriculture as one of them. Hydroponics is a system of agriculture that utilizes nutrient-laden water rather than soil for plant nourishment.

MIT embraces hydroponic farming as an alternative to current systems of agriculture. As it stands today, “massive portions of the world's land area and substantial quantities of fresh water and fossil fuels are being devoted to the production of food which fails to meet humanity's basic dietary needs. The continuation of the current system of agriculture would mean the continuation of the degradation and destruction of the habitats of innumerable species, both aquatic and terrestrial, with insufficient returns.”

Because hydroponics does not require natural precipitation or fertile land in order to be effective, it offers a sustainable means to grow food for people who live in arid regions. Relative to traditional agricultural methods, hydroponic systems require less space and water, while limiting wastewater. What’s more, the application of carbon dioxide at certain stages in a crop’s growth cycle can enhance both early growth and ultimate crop yield, according to

California needs alternatives due to drought

In January of 2014, Gov. Brown declared a State of Emergency stemming from the state’s catastrophic water shortfalls, which caused reservoirs to fall below their record lows.

In the summer of 2014, in an attempt to increase conservation, the Water Board established emergency water conservation regulations intended to reduce urban outdoor water use. Reasoning that in some parts of California, “50 percent or more of daily water use is for lawns and outdoor landscaping,” the regulations prohibited using potable water to wash cars, water outdoor landscapes and operate fountains, among other things. The Water Board even set up a system in which people could report wasteful practices in their workplaces or residential neighborhoods.

In this context, in late December 2014, California’s State Board of Equalization (BOE) proceeded with regulation amendments clarifying that hydroponic farmers qualify for sales and use tax exemptions for fertilizer. The BOE amended regulations add carbon dioxide to the definition of fertilizer, and emphasize that fertilizer does not need to be applied to land to qualify for the exemption. Thus, hydroponic farms which use carbon dioxide as a fertilizer do not have to pay sales and use tax on that carbon dioxide.

Shortly before the BOE’s action, the Santa Clara television station quoted the director of taxation and land use for the California Farm Bureau, John Gamper, as justifying the amendment on several grounds above and beyond the reduction in water use. Gamper said, “this amendment will result in co-benefits for the overall ecosystem because captured carbon dioxide from an industrial process is being utilized in a closed greenhouse environment to produce high quality vegetables while sequestering the carbon dioxide.”

In addition, Director Gamper pointed out that the by-products of the process will be utilized to generate electricity, which will produce carbon dioxide that will be repurposed for use in the next crop. “It is truly a win-win-win situation especially when you consider how water-efficient these highly productive operations are.”

Michigan exempts hydroponic facilities from property taxes

As we explained two weeks ago, Michigan’s Gov. Snyder recently signed numerous bills addressing road and school funding, among other things. Two of these bills, SB 786 and SB 787, were conceived to support facilities that use hydroponics and aquaculture. Aquaculture is another emerging technology that does not utilize soil, involving the cultivation of fish and other aquatic species. SB786 exempts these production facilities from property taxes, and SB 787 imposes a new “specific” tax equal to 25 percent of the regular property tax.

In the 37 to 1 vote, 97 percent of Michigan’s senate republicans, and 100 percent of its democrats supported these bills. Senator Patrick Colbeck (R-Canton) was the sole no-vote.

In the bill analysis, the Senate Fiscal Agency justified the legislation as a way to encourage soilless agriculture, a subset of the second larges—and expanding—industry in Michigan; these kinds of production facilities require a significant investment in technology and infrastructure, and are taxed at a higher rate than in other states. The bills’ sponsor, former state Sen. Bruce Caswell, hoped to align Michigan’s policy with practices of neighboring states and Ontario to help grow these parts of the agriculture sector.

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